Having a reliable and effective managing agent is an essential requirement for the smooth operation of mid-size and large co-op and condo buildings in NYC.
The responsibilities of building management include building maintenance, regulatory compliance monitoring, procuring and maintaining insurance policies and registrations, collecting maintenance and paying bills, handling owner complaints and maintaining books and records.
Arguably the most important responsibility of a managing agent is to field multiple, competitive quotes for large building repairs such as elevator upgrades, roof or boiler replacement and facade work. How well your managing agent can control costs is even more important if you live in a small condo or co-op building since there are fewer owners to foot the repair bills.
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The most visible responsibility of a managing agent is to cause the interior and exterior of a building to be properly maintained and cleaned. A building manager accomplishes this task by hiring and supervising all persons necessary for the efficient operation and maintenance of the property.
Important ongoing hires by the managing agent include a super, exterminator and an elevator servicing company. A good building manager will come to physically inspect the property at least once a month.
In reality, many sub-par management companies in NYC will ‘manage by crisis’ and simply rely on the complaints of owners or the super for identifying issues which need attention.
Because the super is the defacto eyes and ears of the building, who you hire as your super can have a huge impact on the ongoing condition of your building.
Larger condo and co-op associations typically have a live-in super while smaller buildings usually contract a part-time super who visits once or twice a week to clean the lobby, fix broken light bulbs and keep an eye out for anything which needs to be repaired.
Most managing agents have complete autonomy as per their management contract to hire vendors for any essential repairs which cost less than some reasonably low dollar amount, such as $1,500. The purpose of this language is to ensure that the managing agent can expediently handle repairs without the risk of pushback or needless delay from the building’s board.
Unfortunately, it’s far too common to find managing agents who simply have a short-list of expensive and subpar repair companies who they hire every time something goes wrong.
Because there’s no financial ‘skin in the game’ for management companies, there’s a natural tendency for some managers to simply hire their friends or accept the first quote since it takes more work to get multiple quotes.
Having a lazy managing agent who doesn’t bother to procure multiple quotes can be especially deadly in a small building. For example, let’s say you own a small condo in a 10 unit building which has no reserve fund. Assuming all apartments are the same size, it means each apartment owns 10% of the building.
Let’s say the facade needs to be restored. Your building manager gets a quote for $200,000 and encourages you to accept it because they say this is the ‘best company in the business.’ Because there’s no reserve fund, the condo would have to levy an special assessment on each unit owner of $20,000.
Your neighbors who are understandably frustrated about the prospect of a $200,000 building assessment decide to request more quotes on their own. Fortunately, two more quotes come in: one for $170,000 and another for $140,000. Accepting the lower quote of $140,000 would personally save each unit owner $6,000 cash out of pocket.
While the effect of large repair bills and high quotes is less noticeable in larger buildings, it’s still critical for board members and apartment owners to obligate your building management to field multiple, competitive quotes whenever a costly repair is on the horizon.
Co-op and condo building managers also monitor whether or not their properties are in compliance with all building codes, environmental laws, other local ordinances, and deed restrictions.
A managing agent also takes the lead in causing all necessary acts to be done to comply with all state, federal and municipal laws, codes, regulations, orders and violations.
Your building management is also tasked with procuring and maintaining insurance policies in addition to filing and renewing any required licenses, permits and registrations.
These tasks include maintaining DOB registrations for boilers and elevators in addition to facilitating DOB boiler, elevator and facade inspections.
A good building manager will proactively review your insurance coverage from time to time to make sure it’s competitively priced and provides adequate coverage as desired by the condo or co-op board.
The cost of insurance can easily account for 10% to 20% of the budget in a small NYC condo or co-op building.
Therefore, it’s important for owners neighbors and board members to keep an eye out for any increase in insurance costs and compel management to explore lower cost options when necessary.
A managing agent is also typically responsible for collecting monthly condo common charges (or co-op maintenance fees) from unit owners. This responsibility also includes initiating legal proceedings or taking other necessary action to collect delinquent charges.
In addition, building management verifies and pays bills received for services, work and supplies ordered in connection with the maintenance and operation of the building.
A good managing agent will also provide the building with regular monthly statements which indicate all collections and disbursements.
One easy way to gauge the quality of your managing agent is to see how transparent they are when it comes to books and records. Good questions to ask include:
How detailed are the expense line items on the monthly statements?
Did the managing agent field multiple quotes and share them with the building?
Were the actual paid invoices made available to unit owners for review?
A more sordid responsibility of a condo or co-op managing agent is to manage complaints from apartment owners.
Examples of such complains include: maintenance issues, unreasonable noise from neighbors, unit owners leaving personal possessions in the hallways, illegal AirBnB rentals (e.g. per NYC specific short-term rental laws), commercial use of residential apartments, after-hours construction and safety hazards.
Managing agents are also tasked with maintaining a complete set of books and records and other documents pertaining to the maintenance and operation of the Property.
These records may include the history of repairs, complaints and how they were handled, paid invoices as well as inspection and registration records.
Hiring a managing agent is a time-consuming task for small, medium and large condo and co-op buildings.
The challenge is three fold:
1) Finding suitable candidates for a managing agent,
2) Asking the right questions, and
3) Galvanizing the board to actually fire its current managing agent and make a new hire.
There are a number of ways to find managing agent candidates in NYC. These strategies include:
Asking the listing agent who sold your apartment or your buyer’s broker.
Reaching out to friends who live in comparable buildings.
Asking your real estate lawyer.
Once you’ve identified a few candidates, it’s a good idea to meet with each candidate at your building and conduct a walkthrough of the common areas, roof and basement.
Questions to ask the candidates you interview include:
What current maintenance deficiencies do you observe with our building?
What are the top 3 priorities for our building based on what you observed?
What experience do you have in managing comparably sized buildings?
How often do you physically inspect the buildings you manage?
What’s your strategy for dealing with after-hours emergencies?
How do you approach quote procurement for large capital improvement projects?
Can you share with us the financials and budget for other buildings you manage?
Self management is a great idea for smaller buildings which have a large number of owner-occupant, hands-on owners.
The key benefit of self-management for smaller condo and co-op buildings is the fact that unit owners have much more skin in the game when it comes to hiring repair companies and making sure costs stay low while keeping the building in good condition.
Simply put, a self-managed building with motivated owners can save $10k to $20k per year by not having a managing agent while actually doing a better job maintaining the building and controlling costs compared to the best managing agents.
The challenge for small buildings is that they don’t typically have the budget to hire a more established management company. As a result, most small buildings are forced to settle for mediocre managing agents who do a terrible job of actually managing properties.
Fortunately, it’s very easy to spot a bad building manager. Immediate managing agent red-flags include:
Being slow to respond or totally unresponsive to emails
Selectively responding to owner emails and complaints
Failing to adapt to direct requests and feedback from owners
Writing aggressive, petty or negative emails in response to owners who complain
Hiring the same repair companies all the time without fielding multiple quotes
Never actually coming to physically inspect the property
Failing to reign-in unusually high insurance, water or other bills
Tolerating sub-par work from the super or elevator servicing company
Responding to only the board president and ignoring other board members and owners
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.